Obamacare Could Drive Down Your Car Insurance Costs

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Obamacare has already shaken up the market for health insurance. Now a new report from the Rand Corporation shows that it could also affect the costs of other types of insurance — from auto coverage to worker’s compensation to medical malpractice.

“The Affordable Care Act is unlikely to dramatically affect liability costs, but it may influence small and moderate changes in costs over the next several years,” said David Auerbach, a Rand researcher and the study's lead author. “For example, auto insurers may spend less for treating injuries, while it may cost a bit more to provide physicians with medical malpractice coverage.”

What does Obamacare have to do with your car insurance? Auto insurers spends billions of dollars on health care costs related to accidents each year. In 2007, for example, those insurers doled out $35 billion on medical costs tied to accidents. That sum represented about 2 percent of all U.S. health care costs for the year, according to Rand.

However, now that the president’s health care law has taken effect and more people have health insurance — 9.3 million newly insured people, according to a separate Rand survey — some of those costs may be covered by health insurers instead. “As that happens, the cost of providing automobile insurance, workers compensation and homeowners insurance may decline,” Rand says.

The report provides this example of how that might play out:

An individual without health insurance suffering from lower back pain is in an auto accident. He had not received formal medical treatment for the problem prior to the accident. He then undergoes testing and treatment for the problem and submits the medical costs to the auto insurer, claiming that the problem resulted from the accident. Were he insured, he might have seen medical providers previously and addressed the problem through surgery or therapy, eliminating the need to use liability insurance to cover care.

The study predicts that insurers would likely pass on those savings to the consumer through lower premiums. Any savings will be influenced by a number of variables at the state levels. In most cases, the report estimates, the changes will be small — 1.6 percent, on average, across the U.S. In states including Alaska, Colorado, Florida and Montana, though, the liability claim costs could drop by more than 3 percent.

Meanwhile, Rand’s analysis predicts Obamacare could increase doctors’ medical malpractice costs. In that case, the idea is that with more people insured, more will see doctors and have medical procedures — ultimately raising the number of malpractice claims.

Rand estimates that overall malpractice claims, which have been declining during the last decade, could increase by 5 percent under the new law, with liability payments rising by an average 3.4 percent.

The long-term effects of the Obamacare reforms could be even greater, the report suggests. Workers’ compensation (WC) laws, for example, might be rethought, given that one intended benefit of such laws was to allow injured workers the ability to get medical treatment immediately and without having to go through a long legal process.

“If most of the population has private health insurance that can provide treatment immediately following an injury, this rationale for the existence of WC is undermined,” the Rand report suggests.